Retention of Customers vs New Customers - Which is More Profitable?Go Back
Let's dive into the age-old question: should our focus be on retaining our cherished regulars or pursuing new customers to expand our clientele? Spoiler alert: they're both important, but let's break it down and see why one might have the edge!
The big reveal: retaining existing customers is generally more profitable than acquiring new ones. Here's a quick breakdown of the reasons:
1. Repeat Business Delivering an outstanding experience for your guests increases the likelihood of them returning and recommending your venue to others. Not only is retaining a customer more cost-effective, but repeat business also generates greater revenue than new business.
2. Customer Loyalty When guests become regulars, they evolve into invaluable assets for your business. Loyal customers typically spend 67% more per visit than new customers (this can vary depending on factors such as the type of venue, the location, menu offerings, and customer demographic). This is because loyal customers are more familiar with what is on offer and the menu. In addition, loyal guests often stay longer. Even tips to staff by repeat guests tend to increase. They also tend to have established relationships with the venue and are more likely to order higher-priced items or add-ons such as entrees, drinks, or desserts!
Loyal customers will also spread the word about your establishment within their social circles, and leave glowing reviews. In short, these relationships are indispensable.
3. Word Of Mouth The hospitality industry is highly competitive, making word-of-mouth marketing an essential component of success. People trust their friends and family. So when your satisfied customers rave about their experience, you're bound to attract new faces to your venue without spending a dollar on advertising. Talk about a win-win!
4. Cost Considerations It can be a bit pricey to attract new customers, especially when you factor in advertising, promotions, and marketing campaigns. Keeping your current guests happy is usually more budget-friendly, and it brings in more revenue too!
However, it's still vital to draw in new customers to ensure your business continues to grow. Here are some tips for achieving the perfect balance between customer retention and acquisition:
1. Excellent Service
The quality of service you provide plays a significant role in customer retention. Impress your guests, and they'll keep coming back for more. Handmade meringue with their coffee or complimentary bread on arrival? These small details are what make diners' experiences more personalised and memorable!
2. Enticing Incentives
Give your customers a reason to return with loyalty programs, custom SMS discounts, or other tempting offers. They'll be more likely to refer their friends, too!
3. Manage Reviews
The power of reviews in today's day and age is undeniable. Keep an eye on them, respond thoughtfully, and always strive to address any concerns. Prospective visitors who are searching your venue online will see this as a huge green flag!
4. Invest in Marketing
Although customer retention is the priority, customer acquisition remains essential. Utilise targeted advertising and promotions to connect with your ideal audience and generate new business. Something as little as $4.50 per day spent on Instagram Ads can reach over 52,800 people within 4 months! Pretty cool hey!
How can HungryHungry help?
In conclusion, while both customer retention and acquisition are vital for a thriving hospitality business, retaining existing customers proves to be more profitable in the long run. By delivering excellent service, offering incentives, focusing on reviews, and investing in marketing, you can achieve the ideal balance between customer retention and acquisition, leading to sustained business growth.
If you're eager to explore solutions with HungryHungry, our team is ready to discuss our Hooked Marketing options! Whether you're interested in feedback, loyalty, or promotions, we're here to help you find the perfect match for your venue.
Written by Dana Ryan-Grant - Product Marketing & Customer Care at HungryHungry